Question: Suppose the production technology of a firm is Leontief (or fixed proportions) of the following type:

\(q=\min (\alpha L, \beta K)\)

where \(\alpha\) and \(\beta\) are constants. Graph an isoquant of this production function and on it identify the point where \(\alpha L =\beta K\), some point where \(\alpha L < \beta K\), and some point where \(\alpha L>\beta K\). Solve for the MPL and MPK when where \(\alpha L < \beta K\). Do the same when \(\alpha L >\beta K\). Demonstrate what can you conclude about the marginal race of technical substitution at different parts of this isoquant.

In a separate graph, draw the firm’s optimum In this case, indicating the optimal quantity of labor \(\left(L^{*}\right)\) and capital \(\left(k^{*}\right)\) employed in terms of \(q\), \(\alpha\) and/or \(\beta\).

Price: $2.99

Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document